ABSTRACT
Many poor households in the developing world supplement their limited incomes with remittances and microfinance. Much of the literature assumes upward social mobility and economic development from increased household expenditures in nutrition, health, education, and housing driven by remittances and/or microfinance. The New Economics of Labor Migration theory states that, faced with limited access to local capital, credit, and insurance products, working-age people may emigrate to increase their household income, but what happens when people emigrate from rural communities that increasingly have access to credit through microfinance? This chapter investigates the simultaneous impact of microfinance and remittances on the livelihood of Nepalese people by using the 2003–2004 Nepal Living Standard Survey. We find that microfinance is positively associated with an increase in the proportion of household income used for health-care expenses and negatively associated with the percentage of income used for food expenses and housing improvements. Remittances are positively associated with increased expenses for children’s basic education and negatively associated with higher percentages of household income going toward food expenses. The models presented control for social factors such as gender, caste, and ethnicity; education and marital status of the household head; and the number of dependents. The findings and discussion provide insights into the nexus of microfinance, remittances, and livelihoods. An interesting gendered dynamic appears in some households where women apply for micro-credit, which they pay for with remittances sent by male household members.
